The Helm - Lifestyle and Finance Blog | Security Bank & Trust Company

Navigating Commercial Real Estate Loans in Minnesota: A Strategic Guide for 2025 | Security Bank & Trust Co.

Written by Security Bank & Trust Co. | Mar 21, 2025 1:00:00 PM

For Minnesota business owners and investors considering commercial real estate, 2025 presents a unique set of opportunities and challenges. Whether you’re eyeing a retail space in Eden Prairie, an office in Minneapolis, or a warehouse in Ramsey, securing the right financing is a critical step. This guide is designed to help you understand the current landscape of commercial real estate (CRE) loans, assess your options, and make informed decisions that align with your business goals.

Why Consider a CRE Loan in 2025?

In 2025, Minnesota’s commercial real estate market benefits from a stable local economy with steady economic growth with Standard & Poor's Global Market Intelligence projecting real GPD growth of 2.0% in 2025 and 1.7% in 2026. These conditions provide an opportunity for acquiring commercial properties. Property values in key markets like the Twin Cities and Rochester remain resilient, offering potential for equity growth, tax advantages, and protection against rising rental costs.

However, the decision to pursue a CRE loan should hinge on your specific needs:

  • Are you seeking long-term stability or short-term flexibility?
  • Does owning property align with your financial and operational objectives?

Rather than jumping into a loan, let’s explore the practical considerations of leasing versus owning to determine what’s right for you.

Leasing vs. Owning: A Strategic Comparison

Choosing between leasing and owning commercial property involves weighing your priorities:

  • Leasing: Offers flexibility, especially in high-cost areas like Edina, Minnetonka or Wayzata. It requires less upfront capital and suits businesses testing new markets or needing adaptability.
  • Owning: Provides stability and long-term financial benefits. With Minnesota’s CRE market showing steady appreciation, ownership can secure equity and reduce exposure to rent increases.

In 2025, the combination of stable rates and market resilience tilts the scales toward ownership for many Minnesota businesses. That said, the best choice depends on your circumstances. A lender with local expertise can help you analyze the numbers and align your decision with your goals.

Assembling the Right Team

Securing a CRE loan isn’t a solo endeavor—it requires a team of professionals who understand Minnesota’s market dynamics:

  • Real Estate Broker: A local expert familiar with markets from Mankato to Minneapolis can identify properties that match your needs.
  • Lawyer: Someone versed in Minnesota’s zoning laws and tax incentives ensures legal compliance and maximizes benefits.
  • Accountant: A financial professional can organize your statements and projections to strengthen your loan application.
  • Lender: Partnering with a bank that knows Minnesota’s CRE landscape can streamline the process and tailor solutions to your situation.

Local Insight: Minnesota’s seasonal factors—like winter delays—can affect timelines. Engaging your team early helps avoid setbacks.

The Loan Approval Process: A Clear Roadmap

Positioning yourself for a CRE loan in 2025 requires preparation. We've covered commercial applications in detail for business owners before, however, here’s a step-by-step guide for the enterprising commercial real estate investor:

  1. Assess Your Financial Health
    Lenders look at your credit (ideally 680+), revenue stability, and the property’s income potential. A strong debt-service coverage ratio (DSCR) of 1.20 or higher is key.
  2. Gather Documentation with our Commercial Loan Checklist
    Be ready with:
    • A business plan detailing your property strategy.
    • 2-3 years of financial statements and tax returns.
    • Property details, including location and valuation (e.g., Minnesota-specific zoning or incentives).
  3. Choose the Right Loan
    Options include:
    • SBA Loans: Lower down payments, ideal for small businesses acquiring owner-occupied property.
    • Conventional Loans: Best for established firms with solid credit.
    • Bridge Loans: Short-term financing for immediate needs.
  4. Submit Your Application
    A complete, accurate submission prevents delays. If you want to connect with a Minnesota lender, feel free to contact us. We've covered the comprehensive guide to underwriting commercial real estate loans before and we would recommend reading this blog as well. 
  5. Appraisal and Underwriting
    The property’s value and your repayment ability are evaluated, factoring in local trends like tourism in lake towns or tech growth in the Twin Cities.
  6. Close the Loan
    Finalize the agreement and take ownership.

What Makes 2025 Unique for Minnesota?

Several factors highlight 2025 as a strategic time for CRE loans:

  • Rates: Rates are up from 2020-2021 but they have trended down into 2025. Volatility of the rate market is calming. 
  • Growth Sectors: Multifamily, retail strip centers and industrial properties have done well in areas like Rochester and the Twin Cities.
  • Economic Stability: A 2.0% and 1.7% growth rate supports investment confidence.

Challenges like downtown office vacancies exist, but focusing on high-demand property types can reduce risks.

Partnering with a Lender You Can Trust

At Security Bank & Trust Company, we focus on understanding your needs and delivering value:

  • Local Knowledge: We know Minnesota’s CRE market—from Cambridge/Isanti to Waconia to Ramsey—and structure loans accordingly.
  • Tailored Solutions: We align financing with your specific goals. We know that certainty, reliability, and flexibility are important to our clients.
  • Transparent Guidance: We’re here from consultation to closing, ensuring clarity at every step.
  • Highly Regarded: We've been recognized by Twin Cities Business, Newsweek, and GoBankingRates as one of the best banks to do business with in Minnesota. 

Our aim isn’t to sell you a loan—it’s to help you solve a problem or seize an opportunity in Minnesota’s market. We'd love to hear your story.

Next Steps

If you’re exploring a commercial real estate loan in 2025, now is the time to evaluate your options. Contact one of our lending team for a consultation to discuss how we can support your goals with a strategy tailored to Minnesota’s unique landscape.
View full post